domestic dairy policies and international market adjustment in a simplified model of world dairy...

Domestic Dairy Policies and International Market

Adjustment in a Simplified Model of World Dairy

Products Trade

Gany Griffith, NSW Agriculture and Fisheries, Regional Veterinary Laboratory, Armidale, Australia,

Ralph Lattimore, Lincoln University, Canterbury, New Zealand, and

John Robertson, Department of Agricultural Economics, VPI&SU, Blacksburg, Virginia

A simplified multilateral trade model for dairy products is reported that contains five major regions-Australia, the European Community, New Zeatand, the United States, and an aggregate rest of world-and that describes and measures the interactions between national dairy policies and their effects on quantities traded and prices in world markets. The model contains 35 equations estimating, in milk-equivalent terms, the suppiy 01 mitii for manufacturing, the demand for milk products. domestic intervention and farm prices, stockholding behavior. and net trade in milk products. The world price is based on the reconciliation of net trade flows from the five regions.

Two policy experiments are run in which unilateral changes are made in the policy response functions explaining the setting of the domestic intervention prices in the European Community and in the United States. The results suggest that the world price is quite sensitive to changes in domestic policies.

The liberalization of dairy policies in the European Community and in the United States would reduce the need for policy intervention in all other countries.

1. INTRODUCTION

The problems of agricultural trade during the 1980s have been recently well documented (Miller, 1986, and Johnson, 1987). Particular attention has been given to the protectionist agricultural policies in the

Address c.orrcl~polrJenc.~~ to: G. R. Gr@h. NSW Apicwlture and Fisheries. Re,giorlal Veterinar?

Ldwraro~. PMR (UNE). Arrnitiale. NSW, 2351, Artstralitr.

This research was jointly sponsored by the USDA (Cooperative Agreement 58-3522-5-00202)

and the New Zealand Ministry of Commerce. The usual caveats apply.

The authors are grateful to Mary Marchant for comments on an earlier draft.

Received December 199 I ; final draft accepted April 1992.

.hrtttr/ of’ Policy Mnde/ing I S( 2): I4 I - I56 ( 1993)

((:‘I Society for Policy Modeling. 1993 016

I41 ‘I -HY38/93/$6.00

142 G. Griffith. R. Lattimore. and J . Robertson

major developed countries, where domestic producers are insulated from world market conditions and consumers are prevented from pur- chasing at lower world prices.

The world dairy products market is often used as an example of a high level of government assistance provided to the domestic industries in almost all the nations making up this market. The maintenance of a domestic dairy industry is believed to be important because fluid milk is regarded as a necessity, has a relatively inelastic demand, and until recently has been regarded as too bulky and perishable to make long-distance trade feasible. Therefore, most developed countries have well-established dairy industries capable of satisfying domestic fluid milk requirements. However, the overall supply-demand balance for raw milk is also significantly influenced by the supply of and demand for the other dairy products that can be processed from the raw milk.

All the major milk-producing and trading regions considered in this paper-Australia, the European Community (EC), New Zealand (NZ), and the United States (U.S.)-have used intervention measures to influence the domestic farm and consumer price for fluid milk (and milk products) to a level usually above that which would have been determined in the absence of such intervention. For example, guar- anteed minimum prices, quotas, price pooling and buffer funds have all been applied, and in most cases these have been supplemented by export subsidies, import restrictions, input subsidies. and guaran- teed purchases of excess production. The net result has been ratios of producer-to-world prices well above unity in the major dairy trading regions.

For these four regions, Walker ( 1988). using 1986 data calculated producer-to-world price ratios ranging between 1.45-2.10. Ratios of these magnitudes indicate that dairy support prices are set some two times above the world price, increasing the exportable surplus of dairy products and lowering the world price to the extent that these regions are important in world trade. Consumer-to-world price ratios were generally lower, ranging up to 1.75 for Australia.

Overall, the potential beneficiaries of intervention are the domestic milk producers and consumers in the rest of the world. The cost of intervention is borne principally by domestic consumers and taxpayers. Moreover, the relative balance of these economic costs and benefits depends on the level of association between the prices offered for domestic milk production and the underlying world market conditions. Examination of the key relationships determining the level of intervention would seem a particularly important research area.

The main objective of the study is to increase our understanding of

A SIMPLE MODEL OF WORLD DAIRY PRODUCTS TRADE 143

the interactions between national dairy policies in major exporting countries and their effects on quantities traded and prices in world markets. The research attempts to quantify these interactions in a way that is reasonably transparent to policymakers by developing a quan- titative multilateral framework of the dairy sectors of Australia, the EC, NZ, and the U.S.

2. BACKGROUND ON THE WORLD DAIRY MARKET

The four countries involved in this study are important in intema- tional dairy discussions because they are large producers and major exporters of dairy products. They are also important because each country has a comprehensive dairy policy that buffers world market developments to varying degrees. The grouping is a classic case of the strong interactions between domestic policy settings and the world market.

The EC and the U.S. are by far the largest milk-producing regions, producing between them over 40 percent of the world’s milk supply. Australia and NZ are considerably smaller in production terms, with each less than 2 percent of world production (USDA, 1987).

The picture changes considerably when exports are considered. The EC is still the largest exporter overall, but NZ becomes second largest in spite of the smaller production base because the degree of export orientation is higher in NZ (NZDB, 1987). U.S. exports have tradi- tionally been around 1 percent of production, but the degree of export orientation has risen in recent years. Australia is more important in exports than its production base would suggest because it is more export oriented (BAE, 1987).

In terms of the major product categories, the EC and NZ are the most important butter, cheese, and casein exporters (among this group of countries). During the 1980s the U.S. became an important skim- milk powder exporter. One general pattern that emerges is that the EC and NZ tend to have the largest relative exportable surplus of milkfat, whereas the U.S. has the largest relative surplus of nonfat solids.

Each of these countries operate a dairy policy based on some variant of the administered pricing model. This policy framework involves setting part or all of the domestic wholesale price by fiat. In general these policy prices may be termed intervention prices.

Dairy policies in the EC and U.S. tend to involve intervention price settings two to three times the world price, in milk-equivalent terms (Lattimore, Robertson, and Griffith, 1987, and Walker, 1988). These policies by themselves thus tend to increase the exportable surplus of

144 G. Griffith. R. Lattimore. and J. Robertson

dairy products and to lower the world price to the extent these countries are important in trade. Intervention prices are also used in an attempt by policymakers to smooth fluctuations in world prices and to provide stabilized prices signals to farmers.

Another element of policy concerns the holding of inventories. The EC has a very high and rising relative importance in terms of butter and cheese stocks. American stocks have been important in world terms for cheese and are also important for nonfat products (USDA, 1987).

3. MOlDEL FRAMEWORK

3.A. Theoretical Model

The four-country framework is in many respects a small partial equilibrium versit_n of standard commodity models that have been developed in the past for various products in numerous countries in- cluding multicountry models. Two aspects of the specification are less standard and are described here. These are the endogenous policy frameworks employed and the supply blocks.

Each of the countries represented here have a set of dairy programs that can be basically described by an administered pricing model. The core element of this model is an arrangement by which the farm price is determined, at least to some extent, outside the market environment. This price-setting process is usually directed in the first instance at the wholesale market for principal dairy products rather than directly tar- geting the farm price itself. In the EC ministers set the intervention prices for butter, skim-milk. powder. and other dairy products for specified grades of product to act as a floor price in the wholesale market. The price of milk paid to farmers is then determined by wholesale prices for the products less t,he cost of processing. In the other countries, the process is basically similar. The U.S. intervention prices are the support prices for butter and powder. In Australia the intervention prices are termed domestic prices. In NZ the support or intervention prices for dairy products are implicit in the administrative process, and the announced intervention price, the basic price, is expressed in terms of raw milk. Full details of these policies are given in Griffith, Lat- timore, and Robertson (1992).

The dairy policies have a number of other elements. The elements differ in part depending on whether the intervention prices are higher or lower than the world price on the one hand and the domestic equilibrium or self-sufficiency price of the coun.try on the other. The world


price may be higher or lower than the self-sufficiency price. If it is lower and the intervention price is also lower, import quotas or variable tariffs on dairy products are sufficient ancillary policies to protect the intervention price policy.

In each of the countries considered here the intervention price tends to be set above the self-sufficiency price, so that the ancillary policy mechanisms have to be more complex. The higher intervention price now generates an exportable surplus that threatens the intervention policy unless further action is taken. This may occur in a variety of ways. The U.S. Government tends to buy and dispose of the surplus itself. The EC subsidizes the private sector using export subsidies from general tax funds. New Zealand and Australia tend to pass back the export subsidy costs to dairy farmers themselves. In Australia the export “costs” have usually been deducted from current farmer re- turns, whereas in New Zealand a buffer fund is available to enable interyear transfers.

The supply blocks for each country differ because herd data for the preferred specification were unavailable. Ideally the supply sector for each country would be where milk supply is decomposed into two important variables, the dairy labor force and the productivity of labor in dairying. In high-income countries the supply of dairy-farm labor is in decline relatively if not absolutely. In the medium-term milk output is conjectured to be heavily influenced by the supply of labor, particularly where the family unit provides the bulk of the management and labor input. This ts the case in NZ. The second important influence is dairy-farm technology, which affects the productivity of the dairy- farm workforce. This approach has been used by Coeymans and Mun- dlak (1984) and others. The specification emphasizes the importance of the agricultural labor market in medium-term adjustment.

3.B. Empirical Model

WORLD REFERENCE PRICES. New Zealand FOB export prices are used as the world reference prices in this study. New Zealand is the dominant or a major supplier for most dairy products (see, for example, Blank, 1986) and, as shown by Walker (1988), has the lowest calculated producer-to-border and consumer-to-border price ratios of the major trading regions considered in this study. Additionally the cor- relations between the “world price” calculated by Blank ( 1983) and the NZ export price were 0.953 for butter and 0.960 for cheese. Thus the NZ prices are very good approximations for the “world prices.”

146 G. Griffith, R. Lattimole, and J. Robertson

MILK-EQUIVALENT PRICING. Complete and accurate econometric modeling of the relationships between policy intervention in domestic dairy industries and world markets for dairy products would require a large number of equations and explanatory variables. Raw milk can be utilized on-farm as stock feed, for fluid and fresh products for human consumption, and in the manufacture of products for human and in- dustrial purposes.

However, the relationships within the policy price-setting mechanisms can be summarized and compared within a framework that uti- lizes prices only in terms of whole-milk equivalents. Since most support is directed toward the manufacturing milk sector, and since only the combination of the joint products butter and skim-milk powder ensures almost complete exhaustion of the fat and solid and nonfat components of milk, they are generally used as the basis for milk-equivalent pricing. In fact, in the EC and the U.S. (and in Canada) this formula-based pricing is explicitly used in establishing support price levels for milk used in manufacture. In the other regions, it could realistically br: assumed that the same or a similar system would also be used, evi;,r if it is not stated explicitly.

MODEL SPECIFICATION. The current version of the model provides a segment for Australia, EC, NZ, and the U.S. and an aggregate rest- of-world (ROW) block. The complete listing of the model is given in Lattimore, Griffith, and Robertson (1990).

The supply block for Australia, NZ, and the U.S. is each comprised of three equations. For NZ there is a behavioral equation for the number of dairy herds as a proxy for the number of management units. The number of herds is specified as a function of the real price of milk and real off-farm wage rates. The second behavioral equation is for milk production per cow. Yield is specified as a function of real milk prices, climate variables, and technology variables. Herd size is treated exogenously in this version of the model, and an identity aggregates these variables into total manufacturing milk output, after allowing for minor fluid and farm uses. For the other two countries, cow numbers and yield are treated behaviorally with a supply identity determining milk output. Cow numbers are a function of input prices and milk prices, whereas the yield equations and supply identities are identical to the NZ block. The EC has a single supply function, where milk output is specified to be a function of milk price, input price, and technology.

The demand for dairy products is measured in terms of milk equivalent at all levels, wholesale and trade. Total domestic demand is estimated as a single equation for Australia, the EC, and the U.S.,


where demand is a function of real milk price and income. It is treated exogenously for NZ because of its relative unimportance compared to production levels.

Each country block has one or more policy equations to define the relationships between domestic programs and the world market (for more detail, see Griffith. Robertson, and Lattimore 1989). The Aus- tralian model has an equation to represent the domestic intervention price as a function of stock levels and cost factors. The farm price is then related to a composite of this domestic intervention price and the more market-based export interventiorr price, which is determined by the world price in previous periods. In NZ the domestic intervention price is determined by the lagged world price, and the farm price runs off the intervention price. In the EC policy block the key variables are the intervention price expressed in milk equivalents and total stocks of milk products. Both are determined by the difference between the world and intervention prices. There is also an equation linking the farm-gate price and the intervention price. The U.S. policy block has behavioral equations for the intervention (support) price and USDA dairy product removals. The intervention price is determined by government stocks and costs, whereas USDA stocks are mainly dependent on private stock levels. As in the EC model, the farm price is related to the intervention price, and the difference between the world and intervention prices (a measure of fiscal pressure on dairy program budgets) is determined mainly by the world price. In all equations linking the world price to domestic intervention prices, the world price is adjusted to domestic currency and to equivalent milk fat content.

Finally in each region a market balance identity determines net exports as a residual from supply, changes in private and government stocks, and domestic demand.

The ROW is represented by a single constrained estimate of the excess demand function that determines the U.S. dollar world price. The model is closed with an identity expressed in net trade flows, where net exports from Australia, EC, NZ, and the U.S. are set equal to ROW net imports.

The model has 35 equations, which includes 2f behavioral relations (of which one is a constrained estimate) and 14 identities. The world price is estimated in nominal terms based on the reconciliation of net trade flows from the five regions.

3.C. Empirical Results

An estimation strategy for each country’s supply and demand parameters would ideally utilize a full-information, simultaneous-

148 G. Griffith, R. Lattimore. and J. Robertson

Table 1: Long-run Supply Response Elasticities (t-values in parenthesis)*

Elasticity Test statistics

Real

SUPPlY Real Real beef Country variable price wage price R2 DW

Australia No. cows 0.60 0.20 0.90 2.15 (1.72) (l.b9)

EC Milk production 0.03 0.94 I .4b (0.11)

NZ No. dairy herds 0.24 -0.73 0.99 1.40 (I .03) ( - I .9b)

U.S. No. cows I.01 0.99 0.79 (2.3)

*Whcrethecquationincludcsthc ;.pcdendogenous vrriablc. thcshorl-termrcs~nsec~rfticicnt is adjusted,

otherwise the coefficient is unrdjustr%.

equations estimator. However, because of the use of annual data and the resulting degrees of freedom constraint, only single-equation meth- ods were employed. The detailed estimation results are given in Lat- timore. Griffith, and Robertson (1990).

The coefficient estimates are summarized in elasticity terms in Tables l-4. Overall the estimates are reasonable. Most equations display a high degree of explanatory power, and, with the exception of cow numbers in the U.S., autocorrelation problems are minimal. However, the dynamic properties of the model and model simulations are very sensitive to any assumed dynamics in the error process. As a conse- quence, the simulations of U.S. milk production, consumption, and trade are relatively unstable. Fortunately these problems do not unduly influence the simulations of prices or total world trade.

Table 1 shows the long-run production elasticities. The results are mixed. All coefficients have the expected signs. The real farm price is significant at 5 percent in the Australian and U.S. production equation and at a lower level in the NZ equation. The beef price and real wage are significant at the 5-percent level in their respective equations. The EC elasticity is much lower than expected given that this is an estimate of the total supply elasticity. It needs to be recognized that the price elasticities reported include the effect of the prices of production substitutes except in the case of Australia, where the substi- tution effect is explicit. In the NZ case the marked effect of real nonfarm wages on the number of dairy herds is significant and higher than the price elasticity. This equation would predict that, at constant dairy


Table 2: Long-run Yield Response Ehsticities (w~rlues in parenthesis)*

Country

Austmlia

NZ

U.S.

Variable Test statidcs

Real price R2 DW

0. IS o.twlw 0.89 I.23 tZ.th (9.1)

0.16 Q.ot~S 0.93 I.65 t I .6) (3.1) 0.05 0.02 0.99 I.82

t1.31 (2.0)

farmers’ terms of trade and constant technology. milk supply can be expected to decline.

Table 2 presents summary results of the milk-yield equations. Milk yield appears to be inelastic with respect to price and significant above the IO-percent level. Again the degree of fit is encouraging.

The estimation of demand parameters was problematic (Table 3). Of particular note was the difficulty of obtaining negative price and positive income elasticities of demand. This occurred for NZ (finally treated exogenously) and the other countries. The reported coefficients are the result of numerous attempts to avoid positive price elasticities or negative income elasticities.

The response elasticities of the policy variables are given in Table 4. The model was initially estimated with each of the policy variables endogenous to the system. Some selection of explanatory variables

Table 3: Long-run per Cttpita %mnnd Elasticities (t-values in pcnthcsis~*

Country Real price

Etusticity

Real income Trend’ --

Test statistics

RZ DW

Australia

EC

U.S.

- I .32 I.78 - ‘I ‘I _._ I).% 2.02

(1.71) (I .97) (-2.41)

- 0.57 - - 0.86 I .64

( - 2.90) -0. I8 - -. O.-K! 0.77 I.ho

( - 0.94) I - 1.21)

150

0 m

ri

g ;r d d

4 s !G


was attempted to find the key pressure points on the policies, and the final specification generally shows significant relationships. In the Aus- tralian block, dairy stocks appear to influence the domestic intervention price negatively, as might be expected. Stocks reflect fiscal costs. In the EC the intervention price for milk equivalent is also negatively related to the fiscal variable, but in this case fiscal pressure is measured as the difference between the intervention price and the world price. This variable is a proxy for export restitutions. The EC farm price is closely related to the intervention price, the elasticity is approximately equal to unity, in contrast to the Australian case, where the farm price is also affected by the market-determined export price. A key trade- off facing the EC is supported by the policy stocks equation, where stocks are positively related to the export-restitution level. Taken to- gether, the EC policy block shows that as the world price rises (falls) there is a tendency for EC stocks to fall (rise) and for the intervention price to rise (fall).

4. BASE SIMI_‘LATION

A dynamic base simulation was conducted in which lagged endogenous variables are taken from the simulation run itself rather than from the historical data set. Results are given in Lattimore, Griffith, and Robertson ( 1990).

The model generally tits the historic data well over the period 1973- 85. The supply, demand, and policy blocks tend to have good simulation properties in common with other models of this type. The in- ventory and world price variables do not perform so well. Of particular note is that the number of NZ dairy herds is well predicted by the model, but the U.S. cow variable is not.

The model is structured in such a way that errors tend to accumulate in the excess supply and demand functions, and this often results in poor world price predictions. The correlation coefficient on the world price simulation is 0.68, which is lower than for most other variables but reasonably high. In particular, the major turning point in 1982 is picked up by the model.

5. POLICY EXPERIMENTS

As it is structured, the model has major policy variables endogenous to the system. In this sense the policy sections of the model are self- contained in attempting to predict the course of domestic policy intervention. When issues arise concerning changes that would occur if

152 G. Griffith, R. Lattimore, and J. Robertson

the policy-intervention process were to be altered, the structure of the model has to be changed to simulate this process.

The endogenous policy specification is helpful in this context because it allows a policy experiment to be conducted on a subset of countries, leaving other countries to set domestic policies in the usual manner. Two examples of how such policy experiments may be conducted are given here. Both experiments involve unilateral policy changes in each of two countries, the EC and the U.S. While these changes are made, policies in all other countries are determined endogenously.

The first policy experiment involves a change in the U.S. dairy policy process. In that process, it is conjectured that lagged USDA dairy product market removals negatively affect the level at whit!> the support price is set. In the original estimation a Ml-percent increase in USDA dairy product removals appear to cause a 3-percent decrease in the support price the following year. In this first experiment the question is asked: What if this degree of responsiveness is increased tenfold so that only a lo-percent increase in removals would cause a 3-percent decline in support prices? This might represent an increase in fiscal pressure on the Administration as a whole or on the Department of Agriculture. Therefore, this coefficient is changed accordingly, with the remainder of the model unaltered.

The effects on the model are reported as percent changes in the endogenous variables relative to the base simulation results. Selected changes are given in Tables 5 and 6.

The policy shock predictably causes a short-term increase in exports and a short-term decrease in the real U.S. farm price, the world price, and competing exports from N2 and the EC.

It appears to take 3-4 years for the dynamics of adjustment to work through to a final position where the U.S. has fewer cows, higher imports, and lower prices, whereas competing exporters benefit through marginally higher exports and higher world prices. Given that this shock is so large, it is perhaps easier to examine the total elasticities presented in Table 6. In this table the change that USDA stocks have on the U.S. farm price is used as a base point to measure associated changes in other endogenous variables.

Table 6 shows the responses after 1, 3, and 7 years. The change in policy response in the experimi:r;t causes a change in the real U.S. farm price. After one year, U.S. COW numbers are moving in the opposite direction as a result of momentum on the supply side.

In this short-run situation a lo-percent decrease in the real farm price appears to cause a 2-percent increase in U.S. cow numbers. After

Tab

le 5

: Po

licy

Exp

erim

ent

I: I

ncre

ase

Infl

uenc

e of

USD

A S

tock

s on

U.S

. Su

ppor

t Pr

ice

( -0

.03

to

-0.3

. L

TO

ch

ange

fr

om b

ase)

Yea

r U

.S.

real

far

m

pric

e U

.S.

net

impo

rts

U.S

. co

ws

Wor

ld

pric

e no

min

al

NZ

exp

orts

E

C e

xpor

ts

1976

-7

.5

1977

-

13.7

19

78

- 38

.2

1979

-4

6.6

1980

-4

2.9

1981

-

49.6

19

82

- 57

.6

1983

-

57.5

-80

3.6

-49

2.0

-5

-0.9

38

-4

.9

60

-9.2

78

-

13.8

11

6 -

19.2

21

0 -2

5.3

-9.5

-

8.6

-3.3

-4

.2

12.2

-

5.6

18.5

-4

.8

22.9

-2

.4

28.4

1.

3 30

.3

3.7

58.3

7.

4

- 12

.5

- 7.

9 -4

.0

-0.3

3.

3 6.

3 10

.7

16.3

154 G. Griffith. R. Lattimore. and J. Robertson

Table 6: Policy Experiment 1: Total Elasticities w.r.t. Real U.S. Farm Price

Time period (after)

U.S. net U.S. imports cows

Real world price NZ exports EC exports

I year 3.6 -0.2 0.7 0.3 0.6 3 years -0.8 0.1 -0.2 0.1 0.1

7 years -3.7 0.4 - I.0 -0.1 -0.3

7 years the signs of these total elasticities have changed. The model predicts that a fall of 10 percent in the real U.S. farm price would finally be associated with a 4-percent decline in U.S. cows numbers, a 37-percent rise in U.S. net imports, a IO-percent rise in the real world price, and smaller rises of 3 and 1 percent respectively in EC and NZ exports.

The second policy experiment involves a similar change in the policy-making environment, but this time in the EC. In the EC sub- model, the intervention price is posited to be influenced negatively by the difference between the intervention price and the world price the year before, that is, by the size of export restitutions required the year before. Again this variable reflects fiscal pressure. The original elasticity on this variable was -0.08. It is altered to -0.30 for this policy experiment. The results are presented in Table 7.

The fall in EC intervention prices that results from the policy shock is associated with an immediate fall in EC exports with an elasticity of 1.9. EC production is much more inelastic and falls far less (0.1 percent). Real world prices finally rise 4 percent for each IO-percent fall in the EC intervention price, U.S. cow numbers rise 5 percent, and NZ exports rise 1 percent.

6. CONCLUSIONS

There are a number of important conclusions that can be drawn from the simple policy analysis reported in this paper. Moreover, these conclusions tend to support the findings of earlier work in this area.

Table 7: Policy Experiment 2: Total Elasticities w.r.t. EC Real Farm Price

Time period (after)

EC exports

EC production

Real world price

U.S. cows

NZ exports

I year 1.9 0.1 -0.8 -0.5 0.5 3 years 2.5 0. I -0.4 -0.4 -0.1 6 years I.h 0.1 - 0.4 -0.5 -0.1


First, EC and NZ dairy supply appears to be more inelastic than U.S. supply with respect to domestic milk prices. Accordingly, unilateral U.S. dairy policy liberalization is expected to result in greater gains in resource allocation than would occur in the EC or in NZ. Furthermore, more liberal dairy policies in the U.S. or EC cause only small increases in NZ and Australian production and exports.

The world price, however, is quite sensitive to change in domestic policies. This has implications for all countries trading dairy products. Changes in the U.S. support price appear to be associated with equal changes in the real world price in the opposite direction, the EC being only half as much influenced. This would appear to be the result of the relative supply elasticities and the high excess supply elasticity of the U.S. with respect to the support price.

The liberalization of dairy policies in the EC and U.S. would accordingly raise the competitiveness of dairy industries in all other countries, reducing the need for policy intervention in third countries. Furthermore, such gains would flow from the reduction in exportable surpluses in the EC and U.S. without any change in imports by these two countries.

Bureau of Agricultural Economics ( 1987) Commodity Statistical Bulletin. Canberra, Australia:

AGPS (various issues).

Blank, S.C. (1983) World Markets and Prices for Dairy Products. BAE Occasional Paper No.

83. Canberra, Australia: AGPS.

Blank, S.C. (1986) World Dairy Market Structure. Agribusiness 2: 183-198.

Coeymans. J.E.. and Mundlak. Y. (1984) Un Modelo Econometrico para el Analisis del Cre-

simento del Sector Agricola Chileno. Unpublished paper, Instituto de Economica. Univ-

ersidad Catolica de Chile, Santiago, Chile.

Griffith, G.R.. Lattimore, R.G., and Robertson, J.C. (1992) Demand Parameters and Policy

Analysis for the Dairy Sector. In Murket Demandfor Da@ Products (Z.A. Hassan, D.P.

Stonehouse and S.R. Johnson, Eds.). Ames: Iowa State University Press, chapter 2.

Griffith, G.R.. Robertson, J.C., and Lattimore, R.G. (1989) A Comparison of Pricing Policy

Response Functions in the Major Dairy Trading Nations. Research Workpaper, NSW

Agriculture and Fishehies. Division of Rural and Resource Economics, Sydney, Australia.

Johnson, D.G. (1987) World Agriculture in Disarray Revisited. Paper presented at the 31~1

Annual Australian Agricultural Economics Society Conference. Adelaide, Australia.

Lattimore. R.G., Griffith, G.R.. and Robertson, J.C. (1990) Domestic Daity Policies and

Internutionul Murket Adjustment in ~1 SimpliJed Model of World Dairy Products Trade.

Research Workpaper. NSW Agriculture and Fisheries. Division of Rural and Resource

Economics. Sydney, Australia.

Lattimore, R.G., Robertson, J.C., and Griffith, G.R. (1987) Domestic Duiry Policies and

Internutional Market Adjustment: A Report to USDA. Agribusiness and Economics Re-

search Unit, Lincoln College, Lincoln, New Zealand.

Miller, G. ( 1986) The Politicul Economy oflntenuttional Agricultural Policy Reform. Canberra.

Australia: AGPS.

156 G. Griffith, R. Lattimore, and J. Robertson

New Zealand Dairy Board (1987) Annuuf Reports. Wellington, New Zealand: NZDB (various issues).

USDA (1987) World Dairy Situation. Washington, DC: Foreign Agricultural Circular, FD I- 87 (and previous issues).

Walker, A. (1988) World Agricultural Trade Distortions-Measurement and Recent Trends. Paper presented at the 32nd Annual Australian Agricultural Economics Society Confer- ence, Melbourne, Australia.

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